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Last Updated: Monday, 17 December 2007, 22:47 GMT
Morale 'not to blame' for breach
HMRC offices in Washington, Tyne and Wear
The discs were posted from HMRC offices in Tyne and Wear
Low morale at HM Revenue and Customs was not a factor in the loss of two discs containing 25m people's data, its acting chairman has told MPs.

David Hartness told the public accounts committee there was no evidence cost efficiencies or job cuts were to blame.

He said it had been a "dreadful mistake" but denied admitting it was due to "systemic failure".

Earlier the chancellor said there was still no evidence information on the discs had been used by criminals.

Mr Hartnett took over as acting chairman of HMRC when the previous chairman Paul Gray resigned over the loss of the discs.

Departments merged

Police are still searching for two discs, sent from HMRC offices in Tyne and Wear, unencrypted and unregistered, by courier to the National Audit Office in London. They never arrived.

The discs contained personal details of 25 million people, including National Insurance numbers and bank accounts.

The loss of this data was extremely serious and should not have happened and again I apologise to everyone who has been affected.
Alistair Darling

Mr Hartnett said morale had been low after revenue and customs departments were merged, but said he had found no evidence that had contributed to the loss of the discs.

"I think there has been a dreadful mistake here and it has had a potentially huge impact," he told MPs.

But he said he had never agreed there was a "systemic failure", saying that was for Mr Poynter's review to determine.

'Complete one-off'

He was accompanied by HMRC's new director of data security, Nick Lodge, who said that Kieran Poynter, who is conducting a review of the security breach, had advised there should be one person responsible.

He also confirmed that 1.5kg of cocaine had gone missing from an HMRC secure lock-up in Coventry and a police investigation was underway.

Alistair Darling
Mr Darling apologised again for the loss of the discs

"What I don't know at the minute is whether this cocaine has been sent for destruction, or to a court or to a forensic science laboratory and the paperwork has not been done properly - or it has been stolen. I am very worried if it is the latter," he said.

But he said it was a "complete one-off" and not evidence of a systemic failure.

And it has emerged that a pension firm, Countrywide Assured, has sent out more than 6,500 letters to its customers saying a cartridge containing their personal details had been sent to, and received by, HMRC in September but had since disappeared.

Earlier Chancellor Alistair Darling outlined the interim findings of the Poynter review. He said police searches for the discs was ending, but so far banks had found no evidence of fraud.

Security measures had been recommended including banning the transfer of "bulk data" without certain security measures, and disabling computer laptops to stop information being downloaded without the permission of a senior manager.

'Wholly inadequate'

But Mr Darling said it would be "wholly inappropriate" to draw final conclusions while more inquiries were being carried out. The full report is due "in the first half" of 2008, he said.

But Philip Hammond, for the Conservatives, said it was "a wholly inadequate response from a wholly inadequate chancellor".

Acting Liberal Democrat leader Vincent Cable added: "If data and valuable information is consistently lost or stolen or abused the public completely lose confidence in government in general at all levels."

Transport Secretary Ruth Kelly has said details of three million people who took their driving theory test between September 2004 and April 2007 had disappeared from a secure facility in Iowa in the United States.

Meanwhile, a capability review of HM Revenue and Customs found that "the senior leadership has not been successful in injecting pace, confidence and dynamism throughout the department".

The top team "has more to do to demonstrate that it can take the tough decisions required to set priorities and to bring about organisational clarity".

It also needed "a robust plan" to "resolve staff uncertainty" and be clear about what HMRC will look like in the future.

A capability review of the Treasury found the department was "not driving change with sufficient passion and pace".

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